bankruptcy

By Jeff Brown a Principal of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

Most of us assume that the bankruptcy of a debtor that we are chasing for payment is the death knell for any return. It is true that in most cases the end result of bankruptcy is a minimal or zero return for unsecured creditors. However, there is a lot to say for putting in a relatively small effort to ensure that you are in the mix in case funds become available for distribution.

For example:

The Trustee in Bankruptcy may recover funds from an unexpected source – Trustees don’t simply fill out reports and convene meetings while they administer the bankruptcy. They also search around for possible sources of funds for distribution to unsecured creditors. Once in a while a Trustee will find an asset, or another avenue of recovery, that you did not know existed. For example, a bankrupt may become entitled to a significant asset as part of the deceased estate. The bankrupt could also have made a significant payment to another unsecured creditor within six months of going bankrupt. In both cases, the proceeds of these events can be recovered by the Trustee.

By Bonnie McMahon an Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

In the recent decision of Jones and Inspector-general in Bankruptcy [2018] AATA 3260 (“Jones”), the Administrative Appeals Tribunal has made it clear that a trustee in bankruptcy who files a notice of objection to discharge, needs to comply strictly with the requirements of the s 149D(1) of the Bankruptcy Act 1966 (Cth) (“the Act”), otherwise it is likely that the decision will be cancelled on review, either by the Inspector-General in Bankruptcy or the Tribunal.

The Ground

In Jones, the trustee in bankruptcy (“the Trustee”), had filed a notice of objection to discharge, on the ground set out in s 149D(1)(d) of the Act, that:

“the bankrupt, when requested in writing by the trustee toprovide written information about the bankrupt’s property, income or expected income, failed to comply with the request.”

As identified by the Tribunal, this provision contains five equally important elements which are as follows:Continue reading…

Trustees in bankruptcy can takes steps to be appointed trustees for sale of property jointly owned by the bankrupt estates to which they have been appointed. Just how they do it, will depend upon the law in each state or territory.

In the matter of Juratowitch (as Trustee of the Bankrupt Estates of Parolin and Parolin) v Parolin & Ors [2016] FCCA 3439 (“Juratowitch”), the issue regarding the granting of the ‘power of sale’ to a Trustee of a Bankrupt Estate where the property did not entirely vest in the Trustee was considered by the Federal Circuit Court of Australia. The trustee was trustee of 2 bankrupt estates, each of which was a 1/3rd owner of a property in Victoria.

In an ex parte judgment, Harnett J relied on the decision of the Full Federal Court of Australia in Coshott v Prentice [2014] FCAFC 88 (“Coshott”) to order that a property could be sold by the Trustee of the estates of the 2/3rd owners. This was pursuant to the various provisions of Part IV of the Property Law Act 1858 (Vic), picked up through s79 of the Judiciary Act 1903 (Cth).Continue reading…

By Andrew Behman, an Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

Sometimes, we are all a bit guilty of putting some of the more difficult to collect debts in the ‘too hard basket’ for too long. For so long that they become an ‘old debt’. But how long can you leave an old debt before it’s too late to collect? And the old debt becomes ‘statute barred’?

For debts in NSW, the clock generally starts running for a period of 6 years from the date the cause of action first accrues (e.g. the date of default). After the expiry of this 6 year period, the legislation restricts you from recovering the debt and it becomes ‘stature barred’.

However, it is possible to reset the clock on old debts depending on the circumstances and events that take place during the 6 year period. A few examples that might reset the clock for an old debt include:Continue reading…

Recent updates to the Alleged Offence Referral to AFSA template now provide for the inclusion of details of any person (individual or corporate) acting on behalf of, or assisting, a bankrupt or debtor. This can include a spouse, child, friend, accountant or lawyer assisting a bankrupt in an informal capacity, as is often the case.

As trustees are aware, they have a duty under section 19(1)(i) of the Bankruptcy Act 1966 to refer to AFSA any evidence of an offence committed by a bankrupt. However, there are often circumstances where it is unclear whether there is sufficient evidence to support an offence referral. AFSA has available a Pre Referral Enquiry (“PRE”) program that is a convenient and efficient way to deal with such matters. PREs can be as simple as emailing AFSA with a summary of the circumstances and suspected offence/s and are particularly useful:

for suspected trivial offences (e.g. failure to advise the trustee within 21 days of new employment) that do not impact on an administration;

By Bonnie McMahon, Solicitor, of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

Creditors frustrated by a debtor entering into bankruptcy or a composition should remember that some claims can continued to be pursued, even after the debtor becomes bankrupt or enters a deed of composition with his or her creditors. Debtors in such actions may also need to be aware that going bankrupt may not bring the claims to an end.

Justice Emmett of the Supreme Court of New South Wales has provided some useful guidance in these matters.

The proceedings in the matter of Ritchie v Woodward (Executor of the Estate of the late Brian Patrick Woodward); Rujo Pty Ltd v Woodward (Executor of the Estate of the late Brian Patrick Woodward); Barona Group Pty Ltd v Woodward (Executor of the Estate of the late Brian Patrick Woodward) [2016] NSWSC 1715 (“Ritchie”), proved to be anything but simple for his Honour, with a hearing lasting four weeks (a week longer than expected), and an array of legal topics covered including: contracts, professional negligence, misleading and deceptive conduct, vicarious liability, bankruptcy and insurance claims.Continue reading…

By Bonnie McMahon a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

The Federal Court has recently considered the effect of special proxies in a judgment which is important for those considering how special proxies operate, both in corporate and in personal insolvency. The decision also disallowed retrospective approval of remuneration in bankruptcy, making only prospective fee approval available for trustees.

On 16 December 2015, a bankruptcy trustee held a creditor’s meeting (“the Creditor’s Meeting”), with the main purpose of considering and passing a resolution approving his remuneration. At this meeting the Trustee’s remuneration was approved, on the basis of certain special proxies in favour of the chairperson and minutes secretary.

In Fewin Pty Ltd v Prentice [2016] FCA 1239 (“Fewin”), one of the creditors of the Bankrupt’s estate challenged the procedure undertaken by the Trustee at the Creditor’s Meeting and the validity of the approval of his remuneration.

The Federal Court found that the Trustee’s remuneration was not validly approved at the meeting for a number of reasons, mainly relating to the procedure followed at the creditor’s meeting.Continue reading…

By Andrew Ng an Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

It is a long standing principle that a bankrupt should not be deprived of a right to recover compensation for injury or wrong done to the bankrupt as it would be “unjust and harsh that the estate of the bankrupt and the participating creditors should be swelled and advantaged by a wrong to the person or reputation of the bankrupt” (Moss v. Eaglestone [2011] NSWCA 404 per Allsop P at [64]) . This principle underpins the intention of the statutory framework set out in section 60(4) and section 116(2)(g) the Bankruptcy Act 1966 (Cth) (“the Act”).

Section 116(2)(g) of the Act excludes from property that is divisible among a bankrupt’s creditors any right of the bankrupt to recover damages or compensation for personal injury or wrong done to the bankrupt and any damages or compensation recovered by the bankrupt in respect of such an injury or wrong.Continue reading…

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